In unveiling its plan to overhaul the housing finance system, the White House said on Friday it supports reforms to correct problems in the mortgage servicing and foreclosure process.

These include adopting national standards for mortgage servicing and requiring that mortgage documents disclose the presence of second liens, such as a second mortgage or a home equity loan.

Influential banking regulators have already called for one standard after allegations surfaced that banks used “robo-signers” to sign hundreds of unread documents a day to advance foreclosures without proof they held mortgages.

Bank regulators are considering a federal servicing standard but may need Congress to act to establish a national registry, for example, for first and second mortgage loans on residential properties.

The Federal Deposit Insurance Corp has been pushing hard to include servicing standards in a risk retention rule regulators are drafting. Other banking regulators, however, have questioned whether there is the legal authority to use it as a vehicle for cracking down on servicers, and it remains unclear how or when new standards will be moved.

Servicers would also be required, among other things, to provide borrowers with full and accurate information about their accounts and payment records, according to the OCC’s draft.

In Friday’s housing proposal, the Obama administration said that mortgage documents should disclose second liens or second mortgages and define the process for modifying it if the first loan becomes delinquent.

Critics argue the four biggest banks own the bulk of the second liens and have been reluctant to take write-downs when modifying terms of the first mortgage loan.

FDIC Chairman Sheila Bair has zeroed in on second-lien mortgages and has suggested that banks should be required to take a “meaningful” write-down on the loan when a first-lien is modified.

“As part of any resolution of claims regarding large servicers, a fixed formula should be established to govern the treatment of first and second mortgages when the servicer or its affiliate owns the second lien,” Bair has said.﻿

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What is interesting here is the emergent “need” for governmental mortgage standards. For decades before the govt got into backing mortgages, property was bought and sold by business and individuals using “standards” agreed upon by the buyers and sellers. Banks gave loans based on the paper trail that accompanied the property. Title companies guaranteed that the paper trail was in fact valid. Buyers and sellers completed transactions in accordance with the commonly accepted rules of the marketplace. The system was essentially stable.

Enter the government… first with FHA and VA loans guarantees, then followed by Fannie and Freddie to “goose” property ownership, supported by federal mandate that low-income / no income buyers were not frozen out of the American dream. Result ? All hell breaks loose… because of government intervention that disrupted the commonly accepted rules of the marketplace. The system is in chaos.

Hmmm…Learn from history? Nah, we don’t do that ’round here. We don’t go back and undo bad legislation or policies, we just pile on more and more. Which, in turn, requires more and more bad policies. And the cycle continues…

We also had world-class education before the Department of Education was created. Due to the need of national standards, of course. Now the standards are so low that you’ll be lucky if you can count to twenty without removing your shoes after completing high school.

I fear this is an attempt to bypass the courts as many States require for foreclosure. More than likely any government rules will streamline the process for banks and make it easier to take property rather than protect the little guy. Just look at history, especially recent history with the new bankruptcy laws and TARP. Who does the government support and listen to in the twenty first century?